Harry Dalton is taking his agency back to the 80s.
The founder of Academy Agency announced via Instagram on November 13 that his agency would be swapping from monthly package deals to a commission model.
“We’re removing our fee – because the agency model, it’s broken,” says Dalton in the reel which has since had 35,000 views and 93 shares.
“So, we’re going to put our skin in the game, put our money where our mouth is. We’re going to remove our fees, do 5% of sales. You dip, we dip, you grow, we grow.”
Holding hands
Speaking to NZ Marketing at the start of December, Dalton explains that agencies have always received a kickback from the money made on adverts placed on TV, radio or out of home (OOH).
But, by 2022, digital advertising accounted for 60% of New Zealand’s over $3 billion ad spend — and that money was largely spent with platforms like Meta, Google, and TikTok, with no commission for local agencies.
It’s created a one-way street because they’re not adhering to the long-standing symbiotic relationship that has existed in marketing and advertising for decades, says Dalton. Maybe the likes of Meta and Google don’t even know they’re supposed to give a kickback?
These platforms are where a decent chunk of Academy Agency’s work goes, so both agency and clients lose out.
When clients make lots of money from advertising, offering a flat monthly fee means the agency misses out on scaling up with them, says Dalton. On the other side, clients end up paying fees twice, to Meta or Google, as well as that monthly invoice to their agency.
“The main pain point is when the client has a quiet month. So then the agency fee takes up a high proportion of overall sales, and they hate that – we all hate that, but I can’t charge you any less,” says Dalton.
“So especially this year when there’s been so much uncertainty and so much decline, clients are going, ‘Well if you’re going to hold our hands and if we all go down, we’re all doing down together for that month and you just do a little bit less work, that’s fine. And if you go up, we can work on some bigger projects.’”
Old-school approach
It was from his mum, a former advertiser in Wellington in the 80s, as well as watching TV show Mad Men that Dalton learnt about the commission model.
“This is an old-school approach, it’s not new. It’s how the old boys do it, they go, ‘I want to make sure there’s enough in it for you.’”
He adds some commission models now include a perfomance metric – so above a certain threshold, then the agency gets a cut, but this isn’t what the Academy Agency is doing.
“That adds more layers, more complexity. Let’s agree, it’s 5% of total sales, or we walk away from the deal.”
Academy Agency settled on 5% by assessing how much budget brands should put towards its marketing. Depending on its age, stage and the industry, Dalton says this should be between 5% and 20%.
“So we would take up 5% and then the other 5% or 10% would be Facebook ads.”
All in this together
Since launching the new model, three new clients have already signed up – one came precisely because of the new structure.
“It feels fair. One, we’re making more money – I think we deserve it, all the work and the strategy we do to make these people lots of money – but then the second thing is it’s much more trustworthy and we’re just in it together,” says Dalton.
